Top 5 Ways to Generate Passive Income

Passive income is, in essence, money generated “while you sleep.” In other words, you don’t have to be punching a clock or otherwise actively engaged in a job to make this type of income.

Of course it’s not as easy as snapping your fingers. There is some effort involved with setting up a passive income stream. But once it’s established, you won’t be required to do much more than collect the money.

Here are five great passive income ideas that you can implement now to start making money “in your sleep”:

Blogging. You don’t need special programming skills to start a blog and contribute content to it on a weekly or daily basis. If you blog about a popular (i.e., lucrative) topic like personal finance or celebrities, your website can easily make several hundred dollars a month. You might also wish to try products and review them online. To generate passive income, you can place ads on your site through an affiliate network like Google AdSense. You can also earn affiliate income by featuring individual products on your website through programs like ClickBank or Amazon Affiliates (depending on your state of residence).

Writing and selling an ebook. Many successful entrepreneurs write an ebook and earn a passive income by selling it online. If you have a special skill set or degree, you can capitalize on your knowledge by offering it to others. Your ebook can be featured on your own website as well as the websites of your affiliates. You can also create an online forum for members who have bought the ebook and wish to learn more; this is a great way to introduce and sell additional “backend” products related to your ebook.

Peer-to-peer lending. Online peer-to-peer (P2P) lending sites such as Prosper and LendingClub allow individuals like you to become lenders and earn a good percentage on their money in the process. You can become a lender with as little as $25 and earn up to 30% on your loan over the course of a year. To minimize the risk of an individual borrower going into default, you should select borrowers who have a credit rating of good or excellent and a low debt-to-income ratio (generally under 20%). P2P lending site borrowers pay you back a portion of your invested principal once a month along with interest.

Buying dividend-bearing stocks. Many publicly traded company stocks pay a monthly or quarterly dividend, providing you with a guaranteed amount of money throughout the year. Some tax-exempt stocks, such as real estate investment trusts (REITs), pay out a good percentage of their earnings through dividends, giving you up to a 35% return on your investment. Additionally, since most stocks do appreciate over time, you have the added benefit of seeing your original investment money grow. You can easily buy dividend-bearing stocks through discount brokers like E-Trade and Ameritrade.

Renting property. With the housing market still in a financial slump, you can purchase and rent out real estate to make a passive income every month through your tenants. It’s imperative that you get a good deal on your purchased property and not spend additional capital fixing the place up, since that will cause a delay in when you actually start earning money on your investment. If you can purchase and rent out several properties to reliable tenants, you may not even need to keep your regular job anymore.